Introduction

In home insurance, is the risk aggravated by the insured not notifying the insurer that someone residing in the home has a criminal record? The Superior Court was called upon to decide this question in Fortier v. SSQ, société d’assurances générales inc1.

The facts

The plaintiff Marcelin Fortier is suing his insurer, SSQ General Insurance Company Inc., after it refused to indemnify him for the loss he sustained as a result of a fire at his residence in January 2015.

SSQ asked the Court2 to declare the insurance policy held by Fortier null and void, on the ground that the lengthy criminal record of his spouse was not disclosed to it when their cohabitation began.

SSQ had insured Fortier’s residence since March 2011. At the underwriting stage, Fortier was asked several questions by the insurer, including whether he had a criminal record. At that time his spouse had been incarcerated since 2007.

In October 2011, shortly after her release, Fortier and his spouse resumed their cohabitation. SSQ maintains that this constituted a material aggravation of the risk that invalidated the policy.

Fortier explained to the Court that he didn’t know he had to inform SSQ of his renewed cohabitation with his spouse, since he was the sole owner of his residence. Moreover, SSQ had never asked him any questions about other persons living in his home or whether they had a criminal record.

The Court’s decision

The Court’s reasoning involved a two-pronged analysis, in accordance with the established case law3:

  1. Were the circumstances at issue likely to materially influence a reasonable insurer in deciding whether to cover the risk?4
  2. If so, did Fortier conduct himself as would a normally provident insured?5

The Court allowed Fortier’s action, and concluded that he did not have to disclose to SSQ, during the term of the policy, that his spouse had resumed cohabiting with him.

The Court first of all considered that the information regarding the new resident and her criminal record was not likely to influence a reasonable insurer in deciding whether to accept the risk. The judge took the view that the criminal record of a person who had no financial interest in causing a loss could not constitute a material aggravation of the risk.

The Court went on to conclude, following the second part of its analysis, that SSQ could not reasonably expect that Fortier would, unprompted, have considered necessary to disclose this new development at his home. In addition, the insured’s obligation under the French version of Article 2466 of the Civil Code of Québec to notify the insurer while the policy is in effect of any circumstances that increase the risk extends only to circumstances that result from the insured’s own actions.

The Court placed great importance on the fact that neither when the policy was underwritten nor when it was renewed did SSQ ask any question that would have prompted Fortier to notify it that a person with a criminal record had recently moved in with him.

Comments

This decision, which is currently under appeal6, illustrates the importance of the questionnaire given by the insurer to the prospective insured, not only at the underwriting stage, but upon each renewal of the policy.

The Court concluded that given the lack of any financial incentive to cause a loss on the part of the insured’s spouse, her cohabitation with him would not necessarily influence a reasonable insurer in its decision to keep the policy in force. This conclusion appears however to be at odds with the case law.

SSQ had several witnesses testify to the effect that other insurers include questions in their questionnaire as to whether any persons living under the same roof as the insured has a criminal record. Those witnesses stated that insurers consider that information to be relevant.

In fact, a spouse or child may pose a moral risk7 for an insurer if his or her criminal past relates to an insurable risk. A person residing in the insured premises could – even without any financial incentive to do so – cause harm through theft or arson for example. It can thus be inferred that information concerning such a person’s criminal past is likely to be of interest to an insurer, as certain decisions indicate8.

That said, while a spouse’s criminal record may aggravate the risk, it remains that the insured must understand that this is an important factor for the insurer9.

In its decision, the Court expresses its opinion regarding the transparency the insurer must exhibit regarding the information it seeks from the insured. The judge stresses the fact that SSQ, by not asking any questions in that regard, failed to make it known to the insured that this was an important consideration for it:

[52] [TRANSLATION] Perhaps it is time, if an insurer wants its insured to notify it of such matters during the term of the policy, that the questions it puts to the insured make the latter understand that his or her answers in that regard are of great importance to it.

In light of this decision, it is important to stress the crucial importance of the questionnaire given to the insured when deciding whether to underwrite the risk. While the insured remains bound by the positive obligation to disclose material information in the absence of any specific question by the insurer, the questionnaire often signals which issues are of particular importance for the insurer.